Jonathan macintosh is a highly successful upstate

E6-25 Estimating Cost Behavior; High-Low Method
 
E6-25 Jonathan Macintosh is a highly successful upstate New York orchardman who has formed his own company to produce and package applesauce. Apples can be stored for several months in cold storage, so applesauce production is relatively uniform throughout the year. The recently hired controller for the firm is about to apply the high-low method in estimating the company’s energy cost behavior. The following costs were incurred during the past 12 months:
 
Month
Pints of Applesauce Produced
Energy Cost
January
35,000
$23,400
February
21,000
22,100
March
22,000
22,000
April
24,000
22,450
May
30,000
22,900
June
32,000
23,350
July
40,000
28,000
August
30,000
22,800
September
30,000
23,000
October
28,000
22,700
November
41,000
24,100
December
39,000
24,950
 
Required:
1. Use the high-low method to estimate the company’s energy cost behavior and express it in equation form.
 
2. Predict the energy cost for a month in which 26,000 pints of applesauce are produced.